Two recent problems crossed my desk last month which were costly to the listing broker. Each could have been avoided with some early title work.
I. IS IT MOM OR IS IT POP, OR IS IT BOTH? WHO OWNS THE
My client happily listed a large multi-family property; had
“Pop,” the owner, sign the exclusive listing and marketed
the property for sale, producing three strong offers (near the
list price) within the first month of the listing term. My client
anticipated a happy client’s enthusiastic response, and perhaps
a quick closing.
The owner’s response was different: “Your listing is not
valid, my wife owns a 50 percent interest, she didn’t sign the
listing agreement, and she may not want to sell the property.”
Perhaps Mom and Pop might just sell the property to one of the
buyers my client produced after the claimed void listing was
Could this problem, (i.e. a reference to an otherwise valid
listing agreement and commission claim) have been avoided?
Of course it could have been avoided – if the broker spent
a few moments (likely on line with the County Recorder of
Deeds) looking at the most recent deed to see who the grantee
or grantees were, and then drafting the listing agreement
with all owners (co-owners) named. The broker shall than
have each other sign the listing agreement. That might have
been 10 minutes well spent. My client also would have
protected himself with a warranty of authority in the listing
“The party or parties executing this agreement each warrant
to Broker that he/she/it/they are the owners of the Property
or are authorized by the party or parties holding legal title to
the Property to bind the owner to this agreement and to sell
With this seemingly benign language, my client would have at
least had a claim against Pop for breach of warranty if Mom
refused to sell – a claim for damages in the amount of the lost
commissions. A few moments spent on title work – before
marketing the property, would have been time well spent.
II. MY CLIENT WANTS THE PROPERTY, BUT WHO OWNS IT?
In this buyer representation scenario, my hard working clients
found an old retail property adjacent to vacant land, just
before perfect for a housing development. After obtaining
a commission agreement from the owner, an LOI led to a
contract and almost to a quick closing. Imagine all parties’
surprise when the putative owner found that it did not hold title
to the second (vacant) parcel. Could the unpleasant surprise
have been avoided? Of course it could have – if the broker had
checked the title before negotiations commenced.
The seller and buyer proceeded on Parcel 1, and the buyer was
able to make a deal with the owner of Parcel 2. The owner of
Parcel 1 refused to pay a fee on the sale of Parcel 2, explaining,
“If I am not the seller, why would I pay a fee on sales proceeds
that I do not receive?” The owner of Parcel 2 refused to
sign a commission agreement, and the buyer representation
agreement had no “teeth” to claim the balance of this fee from
The result was a partial fee and money lost because the broker
didn’t do his own advance title work. That broker might
also have protected himself with this language in the Buyer
“Principal and Broker agree that Broker’s commission is to
be paid by the owner of any property acquired by principal.
Principal agrees that it shall not execute any agreement to
acquire any property during the term hereof unless and until
the owner or the owner’s agent agrees, in writing, to pay the
broker a commission computed as __% of the gross sale price.”
The Broker might have also protected himself with inserting
the language quoted in Part I of this article in his commission
agreement with the Owner of Parcel 1.
Lesson learned? Of course! You can’t play tennis without a
racquet and a ball, and a court reserved. Don’t start to work
without your own equipment: a comprehensive listing or
commission agreement with a warranty of ownership, and the
knowledge that you are dealing with all the property owners.
Are these somewhat obvious issues? In hindsight, perhaps they
are. It’s clear that brokers should “look” at the title before they
“leap” into the deal.
BROKER'S DUE DILIGENCE
By Jim Hochman